The Finance 202: Warren goes on attack over Dodd-Frank rollback

The Senate banking deregulation bill looks primed to pass this week. But Sen. Elizabeth Warren (D-Mass.) sent a clear signal Sunday that whatever happens will come with some fireworks.

The industry's Public Critic No. 1 blitzed the Sunday talk-show circuit to keep up her drumbeat of criticism of the package — a campaign she has aimed at both its Republican and Democratic supporters. “I don’t understand how anybody in the United States Senate votes for a bill that’s going to increase the likelihood of taxpayer bailouts,” Warren said on NBC’s “Meet the Press.”

Seventeen Senate Democrats last week joined Republicans in a procedural vote to advance the measure to roll back some Dodd-Frank protections. The move laid bare a rift on the left over whether to ease up on financial interests against which the Democratic Party has rallied as recently as the 2016 campaign. Warren’s intramural volleys — which last week included tweets and a Tuesday fundraising email — drew behind-the-scenes griping from moderate Democrats.

“During senior staff meetings on Friday, according to two sources, the back-and-forth got so heated that Warren's camp offered to pass on the small amount of money raised from the Tuesday email to benefit one or more of her moderate Democratic targets,” Politico’s Elana Schor and Burgess Everett report. “A third Democratic aide present at the meeting described the conversation about the email as contentious, with Warren’s camp refusing to back down, and the offer to pass on the money as sarcastic.”

Supporters of the bill, sponsored by Sen. Mike Crapo (R-Idaho), say it is aimed at providing regulatory relief to small and community banks, not the Wall Street behemoths behind the decade-old crash. Warren and other critics say it goes significantly further, potentially allowing the largest financial institutions to take on more risk, easing oversight of foreign-owned banks and watering down consumer protections.

Sen. Heidi Heitkamp (D-N.D.), facing reelection this year in a state Trump carried, is among the moderate Democrats backing the bank deregulation bill. (AP Photo/J. Scott Applewhite)

"The measure exempts about two dozen financial firms with assets ranging from $50 billion to $250 billion from the strictest rules imposed by the Dodd-Frank Act in the wake of the financial crisis. Warren and other critics say those institutions accepted billions of dollars in taxpayer bailouts at the time and shouldn’t have their oversight relaxed now.

The Massachusetts Democrat went on three Sunday shows to press her point. On 'Fox News Sunday,' she dismissed arguments from fellow Democrats that the banking measure is mainly about benefiting small financial institutions, saying that “if this bill had been about nothing but community banks, I think it would sail through with very little opposition.”

'You don’t have to believe me on this,' Warren continued. 'The Congressional Budget Office has said if this bill goes through, the chances that the American taxpayer will be called on to bail out Wall Street again go up.' On CNN’s 'State of the Union,' she argued that similar efforts to loosen restrictions on the industry helped precipitate the crisis in the first place."

Senators need to sort through dozens of amendments — including 17 from Warren — a process that’s set to start today. “In general, we’re not expecting big changes from what’s already been agreed to,” Capital Alpha’s Ian Katz wrote in a Sunday note. “The bill leaves a lot of leeway in the hands of the regulators, particularly the Fed.”

House Republicans approved a far more sweeping version of a Dodd-Frank rollback last year, and House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) indicated last week that he won’t be inclined to swallow the Senate-passed bill in the name of preserving bipartisan compromise in the upper chamber. “The House will not be ignored,” he said on NPR’s "On Point" last week. “There are two different sides of the Capitol. We will not rubber-stamp what the Senate does.”

You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.

Traders work on the floor of the New York Stock exchange on Friday. (Spencer Platt/Getty Images)

— Investors trim risk. WSJ's Riva Gold and Georgi Kantchev: "Nine years into a roaring stock bull market, fund managers are paying their last respects to Goldilocks. Investors broadly remain bullish on stocks and other investments, aided by an upbeat U.S. jobs report on Friday. But repeated bouts of market volatility in 2018 and signs of a pickup in inflation have forced them for the first time in several years to reassess their tolerance for risk. For many, that means boosting cash positions, slashing equity or diversifying portfolios... Bank of America Merrill Lynch’s most recent fund-manager survey showed a record monthly climb in the percentage of fund managers taking out protection against a sharp fall in equity markets in the next three months."

U.S. unemployment is at rock-bottom levels. The stock market is near a record-high. Wages are finally rising and consumers are brimming with confidence. What could go wrong? Plenty, if the Federal Reserve missteps, as central banks often do at times like this.

Asian stocks gained as trade-war concerns took a backseat to economic optimism following a U.S. jobs report Friday that showed the American economy continued to strengthen without the prior month’s rapid wage gains that stoked inflation fears.

— Trump escalates. Politico's Megan Cassella: "Trump ratcheted up the economic pressure on the European Union over the weekend, threatening to turn allies into enemies at home and abroad with his trade pronouncements... Trump stoked the fire on Saturday by suggesting even broader tariffs for the EU if it doesn't address still-unspecified concerns."

From Trump on Saturday:

The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum. If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!

Targets automakers in Trump states. Politico's Matthew Nussbaum: "Trump, expressing his ire over trade imbalances this weekend, made a peculiar choice: He focused his criticism on two European brands, BMW and Mercedes-Benz, that have significant investments in two of the nation’s most Trump-friendly states.. Trump made no mention of the German brands’ significance to two states that formed part of the bedrock of his support in 2016. BMW has an assembly plant employing more than 9,000 people in Spartanburg, South Carolina; about a third of the BMWs sold in the U.S. in 2017 were produced in the country, the company said. A Mercedes-Benz factory employs 3,500 people near Tuscaloosa, Alabama, according to data from the Alliance of Automobile Manufacturers."

Allies seek guidance. WSJ's Emre Peker and William Mauldin: "American and European officials are planning new trade talks this week as U.S. allies seek ways to avoid steel and aluminum tariffs and China signaled it is poised to retaliate if President Donald Trump implements his biggest 'America first' economic action to date. Mr. Trump’s tariffs declaration Thursday has rattled two of the U.S.’s biggest economic partners, Japan and the European Union. The two economies together account for about a quarter of America’s annual trade in goods, and leaders from both stressed serious concern over the weekend, calling on U.S. officials to exclude them from the measures as close security and trade allies.

U.S. Trade Representative Robert Lighthizer met with EU Trade Commissioner Cecilia Malmstrom and their Japanese counterpart, Hiroshige Seko, in Brussels on Saturday. Officials didn’t immediately comment on the timing and format of the further talks slated for this week."

Global balance menaced. Moody's Analytics chief economist Mark Zandi, via AP's Paul Wiseman: "Tariffs threaten to strangle the global golden goose. The global economy is on the same page for the first time in over a decade. This threatens to derail it.”

An Illinois steel plant revs up.WSJ's Andrew Tangel: "U.S. Steel’s decision to fire up part of idled Granite City plant has ripple effect through community."

Broad support in PA-18. The Post's Dave Weigel: "In the hotly contested special election in this southwest corner of Pennsylvania, one issue has universal support: President Trump’s tariffs on steel and aluminum imports."

— Flake will try to block. Politico's Aubree Eliza Weaver: "Sen. Jeff Flake is pushing legislation to block President Donald Trump’s new tariffs on steel and aluminum, declaring he won’t back any exemptions put forward by the administration. 'The problem is, when you say, "All right, let’s have tariffs. But let’s couple that with uncertainty," that’s almost worst. I mean, those are dual poisons to the economy,' the Arizona Republican said Sunday on NBC’s 'Meet the Press.' 'You know, tariffs are awful. Tariffs married to uncertainty is probably even worse.'... While it would be difficult for Congress to reach a majority on a bill to block the tariffs, it has to try, he said, citing congressional success in the 1970s overriding President Jimmy Carter’s tariffs on oil."

Warren likes tariffs. Axios's Erica Pendey: "Warren said Sunday that she approves of President Trump's move to bring tariffs into the trade conversation. 'What I'd like to see us do is rethink all of our trade policy. And, I have to say, when President Trump says he's putting tariffs on the table, I think tariffs are one part of reworking our trade policy overall,' she told CNN's Jim Acosta on State of the Union."

Rep. Maxine Waters (D-Calif.). (AP Photo/Denis Poroy)

— Trump vs. Waters. LAT's Laura King: "Trump and Rep. Maxine Waters (D-Calif.) engaged in a sharp war of words through the weekend, with Trump calling Waters a 'very low-IQ individual' and Waters firing back by calling Trump 'con man Don.' Trump started the exchange at a raucous Pennsylvania rally Saturday night for Republican House candidate Rick Saccone, Trump derided Waters, who has called for his impeachment, apparently imitating her as supposedly declaring, "'We will impeach him. We will impeach the president. But he hasn't done anything wrong. It doesn't matter; we will impeach him." She's a low-IQ individual — you can't help it, she really is,' Trump said. Waters responded Sunday on MSNBC, saying that 'this is what this con man does. He diverts attention from himself by attacking others. He can keep calling names,' Waters said. 'I've got plenty for him.… Everyone knows he's a con man. He's been a con man all his life.'"

Mnuchin defends Trump. Politico: "Treasury Secretary Steven Mnuchin on Sunday defended [Trump’s] new comments about [Waters], saying he 'likes making funny names.' ... Asked on NBC's "Meet the Press" how he would respond if a member of his own staff made a similar comment, Mnuchin chalked up Trump’s action to the campaign rally environment. 'I’ve been with the president and at campaigns. You know, he likes to put names on people,' the Treasury secretary said. 'He did that through the entire presidential election, including all of the Republicans that he beat. ... These are campaign rally issues.'"

— NEC Watch: Chris Liddell. NYT's Maggie Haberman and Jim Tankersley: "Trump is strongly considering Christopher P. Liddell, a White House official who was an executive at Microsoft and General Motors, to succeed his departing top economic adviser, Gary D. Cohn, according to two people briefed on the discussions. Mr. Trump has not made a firm decision, those briefed on the process said. But Mr. Liddell, the White House’s director of strategic initiatives, is currently seen as a front-runner to replace Mr. Cohn as the director of the National Economic Council, they said...

The president has always wanted a prominent business figure to oversee the council, according to people who have spoken with him. But his aides, mindful of the difficulties they have had attracting people from outside the White House, have been looking internally, and a successor could be named as early as next week. Shahira Knight, a well-respected deputy to Mr. Cohn who was crucial to the legislation revamping the tax code, had been the favored candidate of Mr. Cohn, some White House officials and several Republican congressional aides. But Ms. Knight, who prefers a lower profile, was uninterested, officials said."

— Tax law needs fixes. NYT's Jim Tankersley and Alan Rappeport: "The legislative blitz that rocketed the $1.5 trillion tax cut through Congress in less than two months created a host of errors and ambiguities in the law that businesses big and small are just now discovering and scrambling to address. Companies and trade groups are pushing the Treasury Department and Congress to fix the law’s consequences, some intended and some not, including provisions that disadvantage certain farmers, hurt restaurateurs and retailers and could balloon the tax bills of large multinational corporations. While Treasury can clear up uncertainty about some of the murky provisions, actual errors and unintended language can be solved only legislatively — at a time when Democrats seem disinclined to lend votes to shoring up a law they had no hand in passing and are actively trying to dismantle.

On Thursday, the U.S. Chamber of Commerce released a 15-page request it had sent the Treasury Department for clarification on how the law affects multinational corporations, mutual fund investors and mom-and-pop pass-through entities. It was a public display of the lobbying that businesses are waging primarily behind the scenes to change or shape enforcement of the law, most notably its byzantine new provisions intended to crack down on multinationals sheltering profits abroad for tax purposes."

POCKET CHANGE

Dow Chemical CEO Andrew Liveris. (Aaron M. Sprecher/Bloomberg)

— Liveris out. WSJ's David Benoit: "Longtime Dow Chemical Co. leader Andrew Liveris plans to step down next month, ending a nearly 14-year tenure that culminated with the chemical giant’s combination last year with rival DuPont Co. Mr. Liveris will relinquish the role of executive chairman of the combined company April 1, it announced Monday. Co-lead director Jeff Fettig will assume that role at the company, now known as DowDuPont Inc. and soon to be broken apart. Liveris lieutenant Jim Fitterling will be chief executive of the materials-science company that is expected to be created when the breakup takes place next year."

— CEO-worker pay ratio revealed. WSJ's Theo Francis and Vanessa Fuhrmans: "American workers, for the first time, are discovering how much employees earn at the biggest U.S. companies and how that pay compares with the chief executive’s.

At Humana Inc., the median employee made $57,385 while the CEO made 344 times that much, or $19.8 million, according to the health insurer’s proxy statement.

Whirlpool Corp. says its median worker is a full-time staffer in Brazil earning $19,906 a year, while the CEO made an annualized $7.08 million, or 356 times as much.

At medical-device maker Intuitive Surgical Inc., where the median employee was paid just over $157,000, the CEO got 32 times that, or $5.1 million.

Those three are among more than 50 major companies to reveal the gap between their median worker’s pay and the CEO’s annual compensation. For the first time, this year U.S. publicly traded firms are required to divulge their median employee pay in addition to CEO pay, and the ratio between the two."